BIS says dollar-linked stablecoins could threaten monetary sovereignty in emerging markets

Dollar-linked stablecoins could act as a new form of digital dollarization in emerging markets and threaten local monetary sovereignty, according to an analysis by researchers at the Bank for International Settlements, or BIS. The BIS researchers analyzed foreign reserve holdings across more than 130 countries and stablecoin inflow data, finding that changes in reserve holdings clearly reflected macroeconomic risks, while stablecoins appeared to show little response to capital controls or foreign-exchange regulations imposed by authorities in emerging markets, Odaily reported. BIS emphasized that stablecoins could undermine monetary sovereignty in emerging economies and said authorities need new tools to address financial stability risks stemming from stablecoins.